Dive Brief:

• Employers can legally employ unpaid interns when the work serves an educational purpose, a federal appeals court ruled on Thursday.
• The ruling set aside a lower court decision that Fox Searchlight Pictures, a movie studio, had improperly classified former workers as unpaid interns rather than employees.
• The decision, which sends the case back to the lower court, could have broad ramifications for the way employers rely on unpaid labor, according to the New York Times, adding that it erects large barriers to further class-action lawsuits by unpaid interns against companies where they had worked.

Dive Insight:

The appeals court vacated a 2013 decision by Judge William H. Pauley III of Federal District Court, saying that he had applied an incorrect standard for determining whether a worker should be classified as an employee rather than an unpaid intern.

Basically, the new ruling from a three-judge panel of the United States Court of Appeals for the Second Circuit held that the Labor Department’s criteria were both out of date and not binding on federal courts.

The Times reported that the judge in this case argued that the proper way to determine workers’ status was to apply a “primary beneficiary test” — a concept in which the worker can be considered an employee only if the employer benefits more from the relationship than the intern. The judge wrote that he and his fellow judges on the panel “agree with defendants that the proper question is whether the intern or the employer is the primary beneficiary of the relationship.”